Intraday:
On the 30 minute chart for the S&P 500 we broke out above the downward trend line we had been following for the past week or so. Shortly after the breakout we moved into a bullish alignment of the 10 and 20 period moving averages and set up a bull channel which we remained in the rest of the day. All of this left us with a confirmation of Friday’s reversal candle pattern indicating a move higher.
Daily:
This annotated chart gets a little messy because I wanted to start talking about Eliot wave theory. From what I understand about Eliot wave is that markets move in waves up and waves down. Some people call these moves swings. Now, Eliot wave says that markets move in five waves and each wave can be subdivided into smaller waves. In Eliot wave theory, waves move from top to bottom and vice versa.
The blue lines on my chart show the first three waves of the larger move down based on the apparent bear market and the recent lows. The red lines are the first subdivision of the first wave down and the green lines are a projection of where the market may go from here to complete the second wave and begin the third down for our second leg down of the bear market.
Having received confirmation of our reversal today we also see some indication of bullish momentum entering the market. The Di lines on the ADX indicator are converging again. The MACD histogram appears to have put in a higher low. And the stochastic is attempting to cross the signal line (the red line). I am fairly confident that what I started saying about moving back to the neckline of our head and shoulder pattern is getting ready to play out.
I should point out that no indicator or trading strategy is perfect and Eliot wave is no different. Eliot wave usually breaks down if your wave count is wrong. As with everything else you need confirmation. This is why I usually don’t subscribe to this trading method but for things to be appearing to play out so well with my count at this point, I am going to use it.
No comments:
Post a Comment